The construction of cash flow statement using the indirect method requires which of the following?
I. Income Statement.
II. Balance Sheet.
III. Statement of Retained Earnings.
IV. Statement of Shareholders' Equity.
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A. B. C. D.Explanation
In the indirect method of construction of the cash flow statement, you start with the net income and start adding back non-cash expenses, adjusting for tax effects.
In addition, one needs to look at changes in assets and liabilities accounts to back out investing and financing cash flows. Thus, you need both income statement and the balance sheet for the indirect method of cash flow construction.